Historically, the construction industry has been one of the slowest to adopt new technology, lagging only behind agriculture in digitization. But that’s changing as software entrepreneurs turn their attention to the needs of the deskless workforce.
The ubiquity of mobile devices, cheap and powerful cloud computing, 5G and the Internet of Things (IoT) are all making it possible to put robust technology into the hands of deskless staff, including construction workers. The venture capital industry has taken notice—funding for construction technology has seen a steady uptick since 2013.
CFOs should partner with their IT teams to modernize their back-office systems and prepare to handle a flood of data from the field as paper processes become digital. They should also figure out exactly what field data they want, what tools work best to get it and how to integrate that data into their financial software. Deployed strategically, new tools can help construction finance teams resolve many challenges, including:
Business Continuity Planning
Family-owned businesses are common in the construction industry, and many thriving mid-market and even large companies are still majority-owned by founding families. Finance leaders need to create business continuity plans, whether that’s figuring out how to transfer company ownership to the next generation, establishing an ESOP (Employee Stock Option Plan), or selling or merging the company. There’s a lot of work involved in valuating the business, figuring out the best planning scenario, and helping negotiate relevant deals. Industry-specific ERPs and cloud procurement platforms can give finance professionals a better view into their numbers, help with planning scenarios and standardize the purchasing process across acquired or merged companies.
Changing Accounting Standards
Revenue recognition is always top of mind in the industry. For the past several years, the Construction Financial Management Association (CFMA) has sought to ensure that the new Financial Accounting Standards Board (FASB) rules around revenue recognition are favorable—or at least not punitive—towards the construction industry. As these new rules are implemented, CFOs seek to refine their strategies for how to bill against contracts and tie revenue to either a percentage of completion or work-in-progress schedules. Mobile technologies that expedite communication between the office and the field can also help speed the flow of information.
Construction carries more risk, especially out on the job site, than many other industries—and insurance costs are rising. Some companies are investigating captive insurance programs in which multiple companies pool their assets and fund their own risk by placing money under management so they don’t have to pay exorbitant premiums.
Insurance companies have responded with more flexible products to try to help companies control their costs. CFOs need to evaluate their options—and if they want to participate in a captive insurance program, every participant needs to undergo a thorough assessment of their financial stability.
While a modern ERP system can facilitate most of that process, the assessment would also look at safety and security practices. There’s a lot of technology that can help reduce job site risk. Drones can monitor job sites for safety and security. Sensor-equipped wearables can alert workers to smoke or toxic chemical exposure, and geo-fencing can provide alerts when they’re entering a hazard zone. Firms can also use autonomous equipment to do work in environments that are too hazardous for human workers.
In the office, payment automation software can mitigate payment fraud as part of an overall risk-management program.
Attracting and Retaining Talent
CFOs are working with HR—and, occasionally, external strategists—to refine their hiring, retention and benefit strategies. Mobile training technology can help on-board unskilled workers faster, allowing companies to draw from a larger talent pool. Virtual reality technologies also offer promise for quicker training.
Improving Job-Cost Accounting
Tablets and handheld phones let field staff capture data and send it back to their offices electronically. GPS-enabled time cards can record employee work hours and location on a mobile phone. IoT devices can measure equipment run time.
Cash Management Strategies
Cash management is probably the biggest challenge at any construction company, and effective work-in-progress (WIP) schedule management is critical. The key to the challenge is coordinating between the subcontractor to confirm a job is complete, the project managers to verify that completion and the accounting department to bill the owner, all while syncing everything with the WIP schedule. This is also an area where drones and mobile apps can increase the speed and accuracy of data delivery to finance.
Finance also needs visibility, flexibility and precision control over making and timing payments. With cloud-based payment-automation software, a project manager sitting in a truck can review a payment file, prioritize subcontractor payment schedules and approve payments immediately without having to return to the office to sign a stack of checks and backup documentation. Subs get paid faster and the job keeps moving.
With all the new purpose-built technology coming down the pipe, we’ll finally start to see some real movement towards digitizing the construction industry. Finance teams should prepare by enabling themselves with modern cloud systems for accounting, spend management and payments. They need to enable the field with tools that communicate data back to the office in near real-time. Most importantly, they need to work out how to coordinate it all towards productivity gains and growth and join the ranks of data-driven CFOs who have done the same in other industries.
Jason Krankota is VP of Construction Sales, West Region at Nvoicepay. His expertise in construction business technology spans 20 years, with 10+ years focused on corporate payments, accounts payable, and expense management solutions.